October 2011 Investment Review

How are we doing?

The graph above shows the dramatic 3rd quarter of this year. Since the beginning of July around 1100 points or around 18.73% was wiped off the FTSE100 index. Since the middle of August the market has acted like Dr Jekyll & Mr Hyde; one day up with a rush, the next day plunging back to where it started. You have obviously not escaped the constant bad news on radio & TV, so I will not repeat why this has happened. That’s history now.

Can we do anything?

Well you have done something already. By investing with me you agree not to put all your eggs in one basket. Share holdings range from 33% to 80% so no client has lost anywhere near 19% of their savings. Clients also hold a combination of cash, index-linked gilts, corporate bonds and commercial property. Some of these assets have risen in the last quarter.

Also we did not had any clients invested directly in the FTSE100 index prior to it’s meteoric fall from grace. My reasons for avoiding the index were stated here. The UK fund we have used since 2008 fell by 12.62%.

Some of you who are more speculative have decided with our advice to reposition your funds and get more aggressive in the short term as you still have plenty of time horizon left to wait for the markets to rise again. If upon reading this you feel the same please contact us.

What comes next?

A couple of days ago I said that markets were likely to start to rise from now. You can read my reasons here. It will remain bumpy and it will continue to test investors mettle, but rise they will. We must not mistake the state of the high street or the state of the nation with the level of the UK stock-market. Over 65% of income generated by the companies in the UK index originates from abroad. Globally things are not great but they are much better than here.

Summer in the Northern Hemisphere is notoriously a difficult time for stock-markets. Once again the old adage of “Sell in May and go away, come back St. Leger’s day” would have held true. I probably should have sold everybody down into cash and only bought again on 10th September. But that would have been as easy as choosing the 15/2 outsider Masked Marvel to beat the 2/1 Favourite Sea Moon in the 2011 St. Leger!